<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 28, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_____________to_____________
Commission File Number: 1-12432
AMERICAN POWER CONVERSION CORPORATION
(Exact name of Registrant as specified in its charter)
MASSACHUSETTS 04-2722013
(State or other jurisdiction of (I.R.S. employer identification
incorporation or organization) no.)
132 FAIRGROUNDS ROAD, WEST KINGSTON, RHODE ISLAND 02892
401-789-5735
(Address and telephone number of principal executive offices)
Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES [ X ] NO [ ]
_________
Registrant's Common Stock outstanding, $.01 par value, at November 6, 1997 -
95,199,000 shares
1
<PAGE>
FORM 10-Q
September 28, 1997
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information:
Item 1.
Consolidated Condensed Financial Statements:
Consolidated Condensed Balance Sheets -
September 28, 1997 (Unaudited) and December 31, 1996 3 - 4
Consolidated Condensed Statements of Income -
Nine Months and Three Months Ended
September 28, 1997 and September 30, 1996 (Unaudited) 5
Consolidated Condensed Statements of Cash Flows -
Nine Months and Three Months Ended
September 28, 1997 and September 30, 1996 (Unaudited) 6
Notes to Consolidated Condensed Financial Statements
(Unaudited) 7
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 11
Part II - Other Information:
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
<PAGE>
FORM 10-Q
September 28, 1997
PART I - CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
ASSETS
<CAPTION>
September 28, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $211,901 $153,234
Accounts receivable,
less allowance for doubtful accounts of
$13,095 in 1997 and $10,789 in 1996 139,483 108,544
Inventories:
Raw materials 60,753 68,657
Work-in-process and finished goods 58,091 61,786
Total inventories 118,844 130,443
Prepaid expenses and other current assets 11,959 11,610
Deferred income taxes 25,390 20,284
Total current assets 507,577 424,115
Property, plant and equipment:
Land, buildings and improvements 27,309 18,710
Machinery and equipment 76,403 64,986
Office equipment and furniture 29,148 23,299
Purchased software 8,750 7,357
141,610 114,352
Less accumulated depreciation and amortization 48,308 35,655
Net property, plant and equipment 93,302 78,697
Other assets 1,569 1,190
Total assets $602,448 $504,002
</TABLE>
See accompanying notes to consolidated condensed financial statements
3
<PAGE>
FORM 10-Q
September 28, 1997
<TABLE>
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
September 28, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $34,387 $41,587
Accrued expenses 14,174 12,576
Accrued compensation 17,825 12,217
Accrued sales and marketing programs 20,308 16,360
Accrued pension contributions 6,020 6,290
Income taxes payable 20,141 17,294
Total current liabilities 112,855 106,324
Deferred tax liability 6,846 5,780
Total liabilities 119,701 112,104
Shareholders' equity:
Common stock, $.01 par value;
authorized 200,000 shares; issued 95,308
shares in 1997, 94,417 shares in 1996 953 944
Additional paid-in capital 54,049 48,374
Retained earnings 429,296 344,131
Treasury stock, 125 shares, at cost (1,551) (1,551)
Total shareholders' equity 482,747 391,898
Total liabilities and shareholders' equity $602,448 $504,002
</TABLE>
See accompanying notes to consolidated condensed financial statements
4
<PAGE>
FORM 10-Q
September 28, 1997
<TABLE>
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except earnings per share)
<CAPTION>
Nine months ended Three months ended
September 28, September 30, September 28, September 30,
1997 1996 1997 1996
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $621,653 $496,818 $246,044 $193,755
Cost of goods sold 340,482 289,311 132,471 111,771
Gross margin 281,171 207,507 113,573 81,984
Operating expenses:
Marketing, selling, general and administrative 144,987 106,627 55,705 38,217
Research and development 15,782 10,683 6,186 3,457
Total operating expenses 160,769 117,310 61,891 41,674
Operating income 120,402 90,197 51,682 40,310
Other income, net 2,750 3,365 2,002 1,646
Earnings before income taxes 123,152 93,562 53,684 41,956
Income taxes 38,793 31,343 16,911 14,055
Net income $84,359 $62,219 $36,773 $27,901
Earnings per share $ .88 $ .66 $ .38 $ .30
Weighted average common stock and
common stock equivalents outstanding 96,125 93,995 96,495 94,401
</TABLE>
See accompanying notes to consolidated condensed financial statements
5
<PAGE>
FORM 10-Q
September 28, 1997
<TABLE>
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Nine months ended Three months ended
September 28, September 30, September 28, September 30,
1997 1996 1997 1996
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income $84,359 $62,219 $36,773 $27,901
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 13,335 9,003 4,918 3,559
Provision for doubtful accounts 3,455 3,188 1,327 910
Deferred taxes (4,327) (6,120) 2,884 (3,699)
Changes in operating assets and liabilities:
Increase in accounts receivable (33,810) (34,307) (23,085) (17,020)
Decrease in inventories 11,958 36,798 40,749 5,244
Decrease (increase) in prepaid expenses and
other current assets (1,025) (2,927) 837 (981)
Decrease (increase) in other assets 507 (157) (18) (19)
Increase (decrease) in accounts payable (7,678) 20,713 (3,784) 18,505
Increase in accrued expenses 9,834 16,098 9,616 9,280
Increase in income taxes payable 2,847 12,297 6,197 10,706
Net cash provided by operating activities 79,455 116,805 76,414 54,386
Cash flows from investing activities
Capital expenditures, net of capital grants (26,570) (15,863) (8,057) (7,157)
Cash acquired in acquisition 101 - - -
Net cash used in investing activities (26,469) (15,863) (8,057) (7,157)
Cash flows from financing activities
Proceeds from issuances of common stock 5,681 8,101 739 2,242
Purchases of common stock - (1,551) - (65)
Net cash provided by financing activities 5,681 6,550 739 2,177
Net increase in cash and cash equivalents 58,667 107,492 69,096 49,406
Cash and cash equivalents at beginning of period 153,234 39,040 142,805 97,126
Cash and cash equivalents at end of period $211,901 $146,532 $211,901 $146,532
Supplemental cash flow disclosures
Cash paid during the period for income taxes
(net of refunds) $34,260 $25,166 $8,716 $8,709
</TABLE>
See accompanying notes to consolidated condensed financial statements
6
<PAGE>
FORM 10-Q
September 28, 1997
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Management Representation
In the opinion of management, the accompanying unaudited interim financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position and the results of
operations for the interim periods. The results of operations for the interim
periods are not necessarily indicative of results to be expected for the full
year.
2. Principles of Consolidation
The consolidated financial statements include the financial statements of
American Power Conversion Corporation and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
On February 14, 1997, the Company completed its acquisition of Systems
Enhancement Corporation ("Systems Enhancement"), a privately-held manufacturer
of power management software and accessories. The Company has accounted for the
acquisition as a pooling-of-interests and, accordingly, Systems Enhancement's
results of operations and cash flows are included in the Company's financial
statements from January 1, 1997. The acquisition was deemed to be immaterial to
the Company's consolidated results of operations and financial condition and,
therefore, comparative prior period results have not been restated.
3. Per Share Data
Earnings per common share are based on the weighted average number of shares of
common stock and dilutive common stock options outstanding during each period.
Under the treasury stock method, the unexercised options were assumed to be
exercised at the beginning of the period or at issuance, if later. The assumed
proceeds were then used to purchase common stock at the average market price
during the period. Common stock equivalents whose inclusion would have the
effect of increasing earnings per share (i.e., antidilutive) are excluded from
the computation. Primary and fully diluted earnings per share are equivalent
for all periods presented.
4. Shareholders' Equity
Changes in paid-in capital for the periods presented represent the issuances of
common stock resulting from the exercise of employee stock options, as well as
the Company's contributions to the Employee Stock Ownership Plan.
7
<PAGE>
FORM 10-Q
September 28, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Revenues
Net sales were $246.0 million for the third quarter of 1997, an increase of
27.0% compared to $193.8 million for the same period in 1996. Net sales for the
first nine months of 1997 were $621.7 million compared to $496.8 million in
1996, an increase of 25.1%. The increase was attributable to continued strong
demand for the Company's products across fast-growing core markets, including
computer networking, internetworking equipment and point-of-sale devices, as
well as what the Company believes is an increasing awareness by computer users
of the consequences of data loss and hardware damage which can be caused by
power problems. International net sales (excluding Canada) in the third quarter
of 1997 were up 27% versus the third quarter of 1996, while the North American
market also continued to be strong with net sales up 27%. International sales
(excluding Canada) comprised 36% of net sales in the third quarter of 1997 and
1996.
Cost of Goods Sold
Cost of goods sold was $132.5 million or 53.8% of net sales in the third quarter
of 1997 compared to $111.8 million or 57.7% in the third quarter of 1996. Cost
of goods sold was $340.5 million or 54.8% of net sales in the first nine months
of 1997 compared to $289.3 million or 58.2% in the nine months of 1996. Gross
margins improved by approximately 390 basis points during the third quarter and
approximately 340 basis points during the first nine months of 1997 over the
comparable periods in 1996. The improvements were primarily attributable to
volume production efficiencies combined with continued improvement in margins on
lower cost Back-UPSr products manufactured in the Philippines. Total inventory
reserves at September 28, 1997 were $20.0 million compared to $16.1 million at
December 31, 1996. Second generation Smart-UPSr represented approximately 7% of
total inventories at September 28, 1997 compared to 5% of total inventories at
December 31, 1996. The increased inventory reserves include coverage of the
potential loss exposure that may result from excess inventories as the demand
for second generation products diminishes. The Company's reserve estimate
methodology involves quantifying the total inventory position having potential
loss exposure, reduced by an amount reasonably forecasted to be sold, and
adjusting its interim reserve provisioning to cover the net loss exposure.
Operating Expenses
Operating expenses include marketing, selling, general and administrative
(SG&A), and research and development expenses.
SG&A expenses were $55.7 million or 22.6 % of net sales for the third quarter of
1997 compared to $38.2 million or 19.7% of net sales for the third quarter of
1996. SG&A expenses were $145.0 million or 23.3% of net sales for the first
nine months of 1997 compared to $106.6 million or 21.5% of net sales for the
first nine months of 1996. The increases over last year were due primarily to
increased advertising and promotional costs, as well as costs associated with
increased staffing of sales and other related positions both domestically and
internationally. The allowance for doubtful accounts at September 28, 1997 was
8.6% of accounts receivable, compared to 9.0% at December 31, 1996. The Company
continues to experience strong collection performance. Accounts receivable
balances outstanding over 60 days represented 10.7% of total receivables, up
from 9.1% at December 31, 1996 due to the timing of customer payments received
in early October. Write-offs of uncollectible accounts have historically
represented less than 1% of total receivable balances. A majority of
international customer balances are covered by receivables insurance.
Research and development expenses were $6.2 million or 2.5% of net sales and
$3.5 million or 1.8% of net sales for the third quarter of 1997 and 1996,
respectively. Research and development expenses were $15.8 million or 2.5% of
net sales and $10.7 million or 2.2% of net sales for the first nine months of
1997 and 1996, respectively. The increased research and development spending
primarily reflects increased numbers of software and hardware engineers and
costs associated with new product development and engineering support, including
additional engineering resources gained in the 1997 acquisition of Systems
Enhancement Corporation.
8
<PAGE>
Other Income, Net and Income Taxes
Net foreign currency losses in the third quarter and first nine months of 1997
(primarily related to foreign currency denominated assets of international
subsidiaries for which the U.S. dollar is the functional currency) were more
than offset by an increase in interest income. This increase was due to higher
average cash balances available for investment during the first nine months of
1997 compared to the same period in 1996.
The Company's effective income tax rates were approximately 31.5% and 33.5% for
the quarters ended September 28, 1997 and September 30, 1996, respectively. The
decrease from last year is due to the expected tax savings from an increasing
portion of taxable earnings being generated from the Company's operations in
Ireland, a jurisdiction which currently has a lower income tax rate for
manufacturing companies than the present U.S. statutory income tax rate.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at September 28, 1997 was $394.7 million compared to $317.8
million at December 31, 1996. The Company has been able to increase its working
capital position as the result of continued strong operating results and despite
internally financing the capital investment required to expand its operations.
The Company's cash position increased to $211.9 million at September 28, 1997
from $153.2 million at December 31, 1996.
Worldwide inventories were $118.8 million at September 28, 1997 compared to
$130.4 million at December 31, 1996. Inventories decreased substantially during
the third quarter of 1997 due to operational improvements relating to component
and finished goods planning, combined with work-in-process reductions associated
with the Company's conversion to lean cellular manufacturing. The third quarter
decrease more than offset the first half 1997 inventory build which was
primarily attributable to the effects of seasonal factors, opening new plant
capacity in the Philippines, and the introduction of a new product line, the
Symmetra (TM) Power Array (TM). Inventory levels as a percentage of quarterly
sales were 48% in the third quarter of 1997, 78% in the second quarter of 1997,
93% in the first quarter of 1997, and 62% in the fourth quarter of 1996.
At September 28, 1997, the Company had available for future borrowings $50
million under an unsecured line of credit agreement at a floating interest rate
equal to the bank's cost of funds rate plus .625% and an additional $15 million
under an unsecured line of credit agreement with a second bank at a similar
interest rate. No borrowings were outstanding under these facilities at
September 28, 1997. Additionally, the Company has no significant financial
commitments outstanding other than those required in the normal course of
business.
Capital investment for the first nine months of 1997 consisted primarily of
manufacturing and office equipment, and buildings and improvements. The nature
and level of capital spending was made to establish additional manufacturing
operations in the Philippines, to improve manufacturing capabilities, and to
support the increased marketing, selling, and administrative efforts
necessitated by the Company's growth. Net capital expenditures were financed
from available operating cash. The Company had no material capital commitments
at September 28, 1997.
During the second quarter of 1996, the Company established a manufacturing
operation in the Philippines which is operating within a designated economic
zone which provides certain economic incentives, primarily in the form of tax
exemptions. The Company purchased and improved a 70,000 square foot facility
for approximately $1.5 million which was financed from operating cash. In
January 1997, the Company purchased a second location in the Philippines for
approximately $3 million. The Company began manufacturing selected products at
this facility during the third quarter of 1997. Both Philippines facilities
currently manufacture certain Back-UPS products sold in the Company's domestic
and international markets.
The Company's Galway, Ireland facility is providing manufacturing and technical
support to service the Company's international customers. In 1994, the Company
executed an agreement with the Industrial Development Authority of Ireland
("IDA") under which the Company will receive grant monies equal to 40% of the
costs incurred for machinery, equipment and building improvements for the Galway
facility. The maximum amount attainable under the agreement is approximately
$13.1 million. The grant monies would be repayable, in whole or in part, should
(a) the Company fail to meet certain employment goals established under the
agreement which are to be achieved over a five year implementation period and/or
(b) the Company discontinues operations in Ireland prior to the termination of
the agreement. The agreement terminates eight years from the date of the last
claim made by the Company for grant monies. The total cumulative amount of
capital grant claims submitted through September 28, 1997 was approximately $9.5
million. The total cumulative amount of capital grants received through
9
<PAGE>
September 28, 1997 amounted to approximately $8.3 million. Under a separate
agreement with the IDA, the Company receives up to $3,000 per new employee hired
at the Galway facility for the direct reimbursement of training costs. The
total cumulative amount of training grant claims submitted through September 28,
1997 was approximately $1.8 million. The total cumulative amount of training
grants received through September 28, 1997 amounted to approximately $1.3
million.
The Company continues to investigate potential sites for manufacturing expansion
in international locations. In July 1997, the Company began establishing a
second manufacturing location in Castlebar, Ireland. The Company purchased and
improved a 70,000 square foot facility at which the Company expects to begin
manufacturing certain Matrix-UPS(TM) products beginning in the fourth quarter of
1997. The Company executed an agreement with the IDA under which the Company
will receive grant monies equal to 60% of the costs incurred for machinery,
equipment and building improvements for the Castlebar facility. The maximum
amount attainable under the agreement is approximately $1.3 million. The grant
monies would be repayable, in whole or in part, should (a) the Company fail to
meet ertain employment goals established under the agreement which are to be
achieved over a five year implementation period and/or (b) the Company
discontinues operations in Ireland prior to the termination of the agreement.
The agreement terminates five years from the date of the last claim made by the
Company for grant monies. Under a separate agreement with the IDA, the Company
will also receive up to $12,500 per new employee hired at the Castlebar facility
for the direct reimbursement of training costs.
Management believes that current internal cash flows, together with available
cash, available credit facilities or, if needed, the proceeds from the sale of
additional equity, will be sufficient to support anticipated capital spending
and other working capital requirements for the foreseeable future.
Acquisition
On February 14, 1997, the Company completed its acquisition of Systems
Enhancement Corporation ("Systems Enhancement"), a privately-held manufacturer
of power management software and accessories, by means of a merger of a wholly-
owned subsidiary of the Company with and into Systems Enhancement. As a result
of the merger, Systems Enhancement became a wholly-owned subsidiary of the
Company. The Company issued 480,144 shares of its Common Stock, $.01 par value,
in exchange for all of the issued and outstanding shares of Systems Enhancement.
The Company has accounted for the acquisition as a pooling-of-interests and,
accordingly, Systems Enhancement's results of operations and cash flows are
included in the Company's financial statements from January 1, 1997.
Foreign Currency Activity
Financial statements for the Company's international subsidiaries for which the
U.S. dollar is the functional currency are remeasured into U.S. dollars using
current rates of exchange for monetary assets and liabilities and historical
rates of exchange for nonmonetary assets. Gains and losses from remeasurement
are included in other income (deductions), net.
During 1994, the Company began invoicing its customers in Great Britain, France
and Germany in their respective local currencies. During the second quarter of
1996, the Company began invoicing certain of its Japanese customers in Yen.
At September 28, 1997 the Company's unhedged foreign currency accounts
receivable, by currency, were as follows:
(In thousands) Foreign Currency U.S. Dollars
British Pounds 3,781 6,060
French Francs 21,823 3,649
German Marks 10,826 6,082
Japanese Yen 925,577 7,525
Total gross accounts receivable at September 28, 1997 was approximately $152.6
million. The Company had non-trade receivables of 1,175 thousand Irish Pounds
(approximately US$1,730 thousand), as well as Irish Pound denominated
liabilities of 5,222 thousand (approximately US$7,688 thousand). The Company
also had liabilities denominated in various European currencies of US$3,075
thousand, as well as Yen denominated liabilities of approximately US$3,583
thousand.
The Company continually reviews its foreign exchange exposure and considers
various risk management techniques including the netting of foreign currency
receipts and disbursements, rate protection agreements with customers/vendors
and derivatives arrangements, including foreign exchange contracts. The Company
presently does not utilize rate protection agreements or derivatives
arrangements.
10
<PAGE>
Legal Proceedings
On or about June 16, 1997, Trippe Manufacturing Company ("Trippe") filed suit
against the Company and Systems Enhancement in the United States District Court
for the Northern District of Illinois, alleging a variety of contract,
antitrust, and unfair competition claims relating to the Company's February 14,
1997 acquisition of Systems Enhancement. Trippe sought unspecified damages,
costs, fees, and injunctive relief. On or about September 11, 1997, Trippe
withdrew its lawsuit without prejudice. By stipulation of the parties, the
court dismissed all claims in the lawsuit with prejudice on or about October 22,
1997.
As initially reported in Report on Form 10-Q for the quarter ended June 30,
1995, several purported class action lawsuits were filed in the United States
District Court for the District of Rhode Island in which the Company was named
as a defendant, along with certain of its officers. The lawsuits relate to
disclosures made by the Company in its public filings and press releases and
assert violations of federal securities laws. The plaintiffs seek unspecified
damages, interest, costs and fees. In mid-February 1996, a derivative lawsuit
was filed by two shareholders on behalf and for the benefit of the Company
against certain present and former officers and/or directors of the Company in
the Superior Court of Suffolk County, Massachusetts. The Company was also named
as a nominal defendant. The derivative action plaintiffs allege that the
individual defendants in that case traded in the stock of the Company allegedly
in breach of their fiduciary duty to the Company. It is possible that other
claims may be made against the Company in these actions or that related
allegations could be made that could give rise to other consequences. The
Company intends to defend these lawsuits vigorously and any similar lawsuits
that may be filed; however, the ultimate outcome of these matters cannot yet be
determined. No provision for any liability that may result from these actions
has been recognized in the consolidated condensed financial statements included
in Item 1 of this Report.
Recently Issued Accounting Standards
The Financial Accounting Standards Board recently issued the following
Statements of Financial Accounting Standards (SFAS):
SFAS No. 128, Earnings per Share, establishes standards for computing and
presenting earnings per share, simplifying previous standards and making them
comparable to international earnings per share standards. The Company will
adopt this Statement at December 31, 1997 and does not expect its provisions to
have a material effect on the Company's computation or presentation of earnings
per share.
SFAS No. 130, Reporting Comprehensive Income, establishes standards for
reporting and display of comprehensive income in a full set of financial
statements. This Statement requires companies to (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a balance
sheet. The Company will adopt this Statement at December 31, 1998 and does not
expect its provisions to have a material effect on the Company's presentation of
its consolidated financial statements.
SFAS No. 131, Segment Reporting, establishes standards for reporting information
about operating segments in annual and interim financial statements issued to
shareholders. This Statement also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The Company
will adopt this Statement at December 31, 1998 and is currently studying its
provisions.
Factors That May Affect Future Performance
This document may include forward looking statements. Any statements contained
herein that do not describe historical facts are forward-looking statements.
The Company makes such forward-looking statements under the provisions of the
"safe harbor" section of the Private Securities Litigation Reform Act of 1995.
The forward-looking statements contained herein are based on current
expectations, but are subject to a number of risks and uncertainties which could
cause actual results to differ from those projected. The factors that could
cause actual results to differ materially from such forward-looking statements
include the following: the timely development and acceptance of new products
such as the Symmetra Power Array; ramp up and expansion of manufacturing
capacity; general economic conditions and growth rates in the power protection
industry and related industries, including but not limited to the PC, server,
and networking industries; competitive factors and pricing pressures; changes in
product mix; changes in the seasonality of demand patterns; inventory risks due
to shifts in market demand; mergers and acquisitions; component constraints and
shortages; risk of nonpayment of accounts receivable; the uncertainty of the
litigation process including risk of an unexpected, unfavorable result of
current litigation; factors associated with international operations; and the
risks described from time to time in the Company's filings with the Securities
and Exchange Commission.
11
<PAGE>
FORM 10-Q
September 28, 1997
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On or about June 16, 1997, Trippe Manufacturing Company ("Trippe") filed suit
against the Company and Systems Enhancement in the United States District Court
for the Northern District of Illinois, alleging a variety of contract,
antitrust, and unfair competition claims relating to the Company's February 14,
1997 acquisition of Systems Enhancement. Trippe sought unspecified damages,
costs, fees, and injunctive relief. On or about September 11, 1997, Trippe
withdrew its lawsuit without prejudice. By stipulation of the parties, the
court dismissed all claims in the lawsuit with prejudice on or about October 22,
1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
Exhibit No. 11 - Computation of Earnings per Share (Page 14)
Exhibit No. 27 - Financial Data Schedule
(B) Reports on Form 8-K
No reports on Form 8-K were filed by American Power Conversion Corporation
during the quarter ended September 28, 1997.
12
<PAGE>
FORM 10-Q
September 28, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN POWER CONVERSION CORPORATION
Date: November 12, 1997
/s/ Donald M. Muir
Donald M. Muir
Chief Financial Officer
(Principal Accounting And Financial Officer)
13
<PAGE>
FORM 10-Q
September 28, 1997
EXHIBIT 11
<TABLE>
AMERICAN POWER CONVERSION CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except for earnings per share)
<CAPTION>
Nine months ended Three months ended
September 28, September 30, September 28, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Primary
Weighted average common stock outstanding 95,040 93,751 95,279 94,039
Net effect of dilutive stock options based on
the treasury stock method using the average
market price 1,085 244 1,216 362
Total 96,125 93,995 96,495 94,401
Net income $84,359 $62,219 $36,773 $27,901
Per share amount $ .88 $ .66 $ .38 $ .30
Fully diluted
Weighted average common stock outstanding 95,040 93,751 95,279 94,039
Net effect of dilutive stock options based on
the treasury stock method using the period
end market price 1,375 544 1,375 562
Total 96,415 94,295 96,654 94,601
Net income $84,359 $62,219 $36,773 $27,901
Per share amount $ .87 $ .66 $ .38 $ .29
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET AT SEPTEMBER 28, 1997 AND CONSOLIDATED
CONDENSED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-28-1997
<EXCHANGE-RATE> 1.00
<CASH> 211,901,000
<SECURITIES> 0
<RECEIVABLES> 152,578,000
<ALLOWANCES> 13,095,000
<INVENTORY> 118,844,000
<CURRENT-ASSETS> 507,577,000
<PP&E> 141,610,000
<DEPRECIATION> 48,308,000
<TOTAL-ASSETS> 602,448,000
<CURRENT-LIABILITIES> 112,855,000
<BONDS> 0
0
0
<COMMON> 953,000
<OTHER-SE> 481,794,000
<TOTAL-LIABILITY-AND-EQUITY> 602,448,000
<SALES> 621,653,000
<TOTAL-REVENUES> 621,653,000
<CGS> 340,482,000
<TOTAL-COSTS> 501,251,000
<OTHER-EXPENSES> 2,750,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 123,152,000
<INCOME-TAX> 38,793,000
<INCOME-CONTINUING> 84,359,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84,359,000
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.87
</TABLE>
